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U. S. Farm Credit Conditions Under Pressure

“Business expansion for farms appears to

be entering a downward cycle while the

broader commercial economy is recovering.”

– PAYNET

Conditions in U. S. farming regions that had outper formed the economy during the recession are deteriorating amid rising credit problems and contracting business activity, according to commercial credit analysis firm PayNet Inc.

In a report issued March 15 at the Reuters Food and Agriculture Summit, PayNet said the overall U. S. farm sector saw a 51 per cent rise in asset repossession rates from 2005 to 2009 and had loan delinquencies of 2.25 per cent at the end of 2009.

“Although lower than other

segments of the economy such as construction, farms will show elevated levels of defaults compared with their experience over the previous five years,” PayNet said. “Business expansion for farms appears to be entering a downward cycle while the broader commercial economy is recovering.”

The corn belt from Ohio west to Iowa and Minnesota south to Missouri, buoyed by strong grain demand from the livestock and energy sectors, continues to show higher credit quality than all other geographic regions making up the farm economy.

But that strength is waning as the overall U. S. economic downturn persists, PayNet said. Similarly, the Central Plains, while still a relatively healthy region, is showing signs of stress on debt repayments seen in the overall farm sector.

“While the small business

economy starts to expand in early 2010, farms appear to be pulling in their horns and unlikely to invest in business expansion,” PayNet said.

“Although farms appear to be taking a defensive stance, farm equity is substantial among the corn belt and Plains primarily from land values.”

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